New Bill Seeks to Speed Co-op Purchases

Stop me if you’ve heard this one before. A state legislator walks into the Capitol building in Albany and proposes a law that would require co-op boards to reach a decision on purchase applications within 45 days. The idea wins the enthusiastic backing of the real estate industry, but co-op advocates mount a furious lobbying campaign against the bill. It dies before reaching the governor’s desk.

You’re forgiven if you’ve heard this one before, because variations on this scenario have been playing out annually for at least the past decade. Some of these doomed proposals would have required boards not only to act in a timely fashion – but also to spell out their reasons for rejecting a purchase application. This is anathema in the world of co-op boards, where court rulings have given boards coveted powers to make decisions “for any reason or no reason,” provided boards are acting in good faith and are not discriminating against a class protected by Fair Housing laws.

Which brings us to state Senator Kemp Hannon, a Republican from Garden City, Long Island, who has just introduced bill S-2540, known as “The Fairness in Cooperative Home Ownership Act.” It would require every co-op board in the state to acknowledge the receipt of a purchase application within 10 days and spell out areas where the application is incomplete. Boards would then have 45 days to accept or reject the completed application and notify the applicant of their decision in writing. Failure to do so would result in automatic approval of the sale.

“Co-op boards can stymie any change by not taking any action,” Hannon says. “When they do that, they’re acting to the detriment of shareholders in the co-op who need to sell their apartments.”

Unlike past proposals that would have required boards to spell out the reasons behind their decisions – part of a quest for greater “transparency,” according to their sponsors – Hannon’s bill is mute on this point. “This bill is designed to make the mechanics of the approval process move forward,” he says. Period.

That sounds reasonable to Michael Kelly, governmental affairs director for the New York State Association of Realtors. “I don’t think it’s too much to ask a co-op board to give a timely response to a purchase applicant,” Kelly says. “The majority of boards are doing the right thing, but there are some bad apples that we believe are using a loophole in the law to discriminate. The loophole is that the board doesn’t have to give a response, and they can sit on an application.”

Despite the bill’s limited scope, people who support co-op boards are already circling the wagons.

“I don’t think there’s a need for this law,” says attorney Deborah Koplovitz, a shareholder in the firm Anderson Kill. “I don’t think any board – any good board – purposely sits on applications. For the government to step in and say boards need to let in people who may have a negative impact on the building – that’s contrary to the board’s good-faith obligation. I don’t think this law furthers any legitimate objective that’s not already provided for.”

Mary Ann Rothman, executive director of the New York Council of Cooperatives and Condominiums, described a similar bill last year as “the start of a slippery slope towards total oversight of the admissions process.” This year, she adds, “No one-size-fits-all, government-imposed process is going to do anything positive for the admissions process.”

S-2540 has been referred to the senate’s Judiciary Committee. Stay tuned.